Leap of faith

It’s touted as the biggest reform the country will see post the initial burst in 1991. In July, India will be switching over to the Goods and Services Tax regime. Even as the final contours of the GST are hugely diluted from what was envisaged, there is anxiety about the transition. 

While the dream of ‘one nation, one market’ seems closer to reality, there is a good amount of complexity that companies will have to live with. For starters, instead of a single tax, the GST will be levied in the form of Central GST, State GST and Inter-State GST. While it seems like a compromise solution, states can also impose local levies. Although states can’t unilaterally introduce new indirect taxes without the GST Council’s approval, it’s unclear how these local levies may be used or misused. 

Though the efficacy of this local version of GST will be known only after implementation, one can only take comfort in the fact that there are over 40 models of GST in force across 160 countries, so there is no set formula for success. What is guaranteed though is inflation, going by the experience in most countries in the immediate years after GST implementation. The finance minister, however, feels otherwise, citing that 55% of items in the CPI basket are tax-exempt and another one-third will be taxed at a lower rate. Again, wait and watch.

 Notwithstanding the chaos, the larger companies are sprucing up their operations and supply chain in the hope of reaping more efficiency and cost savings. The smaller ones are still grappling with what is to come. But then, every single entity must be tax-compliant and should reflect in the system to pocket tax credits. At the very least, it will take a couple of years for the chaos to settle. The clear winners are logistics players, who are anticipating more business to come their way.

The change and challenges in store due to implementation of GST is the subject of this issue’s cover story Getting It Right. Among other stories, we take a look at the stupendous rise of Avenue Supermarts, which owns value retailer D-Mart. There is also a feature on how QSR chains are dealing with the current slowdown in footfalls.